Abstract
Small and medium scale enterprises (SMEs) are an important framework for promoting economic prosperity and wealth creation. Despite their importance as instruments of economic growth and development, the performance of SMEs in Nigeria has over time continued to decline with an attendant impact on the country’s development. This study was conducted to examine whether strategic orientation and its dimensions of market, learning, and entrepreneurial orientations improve the performance of SMEs. Also, the study examined whether competitive intensity moderates these relationships. The study employed a cross-sectional research design on a sample of 213 SMEs in Nigeria. PLS-SEM was used as the tool for data analysis while the validity of the measurement instruments was tested and found satisfactory. The study found that only the market orientation dimension contributes to the performance of SMEs in Nigeria while learning and entrepreneurial dimensions failed to predict performance. Competitive intensity also failed to moderate the relationship between strategic orientation and the performance of SMEs in Nigeria. The theoretical and practical implications of the study were then presented.
Similar content being viewed by others
Avoid common mistakes on your manuscript.
Introduction
Small and medium scale enterprises (SMEs) play an important role in the economic growth and development of nations, especially in resource allocation and wealth creation (Dibal et al., 2021; Hamden et al., 2022). SMEs form the largest percentage of firms in most economies accounting for as much as 98% of all firms in most developed and emerging economies (Lussier, 2016). Their contribution to total employment is over 70% for highly developed countries and 45% for emerging economies (Organization for Economic Cooperation and Development [OECD], 2017). In Nigeria, SMEs contribute over 75% in employment. However, their rate of contribution to the gross domestic product in Nigeria has not improved over the last three years (Adeosun & Shittu, 2021), which has contributed to an increase in the mortality rate of SMEs, estimated at 62% (WeeTracker, 2020). To help reduce the mortality rates of SMEs in Nigeria, the Nigerian government and regulatory authorities have extended support to these SMEs in form of financial grants and loans, tax breaks, and through programs such as “Buy Nigeria,” the Small and Medium Enterprises Equity Investment Scheme (SMEEIS), Agricultural Credit Support Scheme (ACSS), Real Sector Support Facility (RSSF), and Bank of Industry Funds among many others. All these attempts by the government and regulatory authorities responsible for the promotion of SMEs to prop up the SME sector and support it with targeted resources have failed to reverse their poor performance (Adeosun & Shittu, 2021; Akaeze & Akaeze, 2017) attracting theoretical debate and empirical studies to explore the underlying causes of these poor performances of SMEs.
Theoretical debates have focused on exploring individual factors and lack of resources and support as the reasons for the declining performance of SMEs in Nigeria (Effiom & Edet, 2018; Iyortsuun & Shakpande, 2022; Sharmilee & Muhammad, 2016) without considering the strategic aspects of SMEs. This study, therefore, makes a theoretical contribution by exploring whether strategic factors will provide an explanation for the declining performance of SMEs in Nigeria. Specifically, the study explores whether strategic orientation provides an explanation of the performance of SMEs in Nigeria. This study, therefore, answers the call by scholars such as Rezazadeh et al. (2016), Obeidat (2016), and Khan et al. (2022) to explore whether strategic orientation plays any role in improving firm performance. As an important concept in entrepreneurship and strategic management, strategic orientation is noted as contributing to organizational performance (Rezazadeh et al., 2016). It captures a firm’s posture in understanding and managing its environment (Gatignon & Xuereb, 1997; Weinzimmer et al., 2012) which ultimately impacts its performance (Kohli & Jaworski, 1990). This study considers strategic orientation as a multidimensional construct consisting of market, learning, and entrepreneurial orientations (Herath & Rosli, 2014; Ibarra-Cisneros et al., 2021).
Another contribution of this study is its inclusion of competitive intensity a boundary condition under which strategic orientation impacts the performance of SMEs (Baron & Kenny, 1986). This is based on the evidence of conflicting research findings on the positive impact of strategic orientation on firm performance (Kirca, Jayachandran & Bearden, 2005; Neneh, 2016). The study, therefore, modeled competitive intensity as the moderator of the relationship between strategic orientation and the performance of SMEs in Nigeria.
The following sections are divided into the theoretical framework and literature review and hypotheses development. The subsequent section of the study covers the research methodology, data analysis and results, discussion of findings, contribution to knowledge, and lastly, limitations and suggestions for further studies.
Theoretical framework
Social Cognitive Theory (SCT) (Bandura, 1989) is the theoretical lens through which this study explores the role of strategic orientation and competitive intensity on firm performance. SCT is founded on the “model of causation involving triadic reciprocal determinism” (Bandura, 1989, p.2). The main theme of the causation model focuses on a reciprocal relationship of the individual, behavior, and environment, that is, the functional dependence in the reciprocal relationship among the individual, his behavior, and the environment in which the individual operates. According to the theory, the individual is an active component in this triadic reciprocal relationship and their behaviors is contingent on the environmental factors. Applying the themes of the SCT to this study, managers or owners of SMEs who are the individuals as noted by the SCT are actively involved in the pursuit of their firm’s objective and are focused on improving firm performance. They are also aware of and conversant with the environmental forces at play that can hinder them or support them to achieve their firm performance. The implication is that the behaviors they enact are in congruence with the environmental cues with the behavior dependent on the individual’s value system, perception of the environment, self-reflection, cognitive abilities, and vicarious learning. The way an individual (manager or owner of SME) thinks is an important determinant of behavior in the context of the environmental factors. Consequently, SCT is relevant in explaining managers or SME owners understanding of the environmental factors and how to manage these factors (Gatignon & Xuereb, 1997). Their disposition or orientation determines the behaviors that are necessary in influencing positive firm performance in the context of the environmental factors. In simple terms, their market, learning and entrepreneurial orientations are dependent on the environmental factors, which influence their behavioral enactments that target SME performance.
Literature review and hypotheses development
Market orientation and performance
Interest in the market orientation dimension of strategic orientation started in the 1990s (Harris, 2002) with authors arguing for a clear distinction between the market concept and the market orientation. Ospina & Perez (2013) differentiate market concept from market orientation by arguing that while the former is a management philosophy, the latter is concerned with the “activities and behaviors required for implementing this philosophy successfully” (p.42). Kohli & Jaworski (1990) defined market orientation as the activities and behaviors of organizations that operationalize and implement the market concept. In their contribution to the debate of what constitutes market orientation, Kohli & Jaworski (1990) defined it from the behavioral perspective while Narver and Slater (1990) looked at it from the cultural perspective. In the behavioral perspective, market orientation explores how organizations implement the market concept while the cultural perspective captures the organizational “culture that most effectively and efficiently creates the necessary behaviors for the creation of superior value” (Narver & Slater, 1990, p.21). The market orientation concept has therefore been linked to firm outcomes, which is defined in this as SME performance (Tomal & Jones, 2015).
Empirical studies have, therefore, explored the relationship between market orientation and firm performance (Voss & Voss, 2000). They argue that this relationship is positive because market orientation affords the firm owners the opportunity to understand the market, specifically, its customers, which impacts positively SME performance if the firm exploits such markets. Recent studies have also shown that market orientation has a positive effect on firm performance. For instance, a study by Ayayi et al. (2018) shows that market orientation is significantly related to the performance of hotels in Nigeria. Likewise, studies by Ladipo et al. (2016), Nurala et al. (2021), and Cuu & Trang (2021) have also shown that the effect of market orientation on the performance of SMEs was significant. Based on the empirical evidence and theoretical arguments, I propose that the activities and behaviors of firms when operationalized and implemented will contribute positively to the performance of SMEs. The following hypothesis is stated thus:
-
Hypothesis 1: Market orientation has a significant and positive effect on the performance of SMEs in Nigeria.
Learning orientation and performance
Learning orientation is another dimension of strategic orientation that focuses on how an organization engages in higher-order learning (Dutta et al., 2016). It captures the ability of an organization to unlearn old knowledge in favor of new knowledge that generates innovative capacity and ultimately firm performance. Bontis et al. (2002) consider learning orientation as the attitude of managers and owners of organizations towards how an organization gains and utilizes knowledge. Dutta et al. (2016), therefore, consider learning orientation “as a resource and organizational capability that supports companies to develop their competitiveness” (p.397). Making their contribution, Sinkula et al. (1997) conceptualize learning orientation as organizational values that support the generation and utilization of knowledge in order to achieve organizational success. Learning orientation could, therefore, be defined in terms of how managers and owners of firms apply cognition, intelligence, and experience to acquire, exchange, and use knowledge to achieve organizational success. Inherent in this conceptualization is, therefore, the link between learning orientation and firm performance.
Authors have argued that the relationship between learning orientation and SME performance is mixed. For instance, a study by Martinez et al. (2020) involving SMEs in emerging economies has shown that learning orientation contributes positively to improving organizational performance. On the other hand, authors such as Werlang & Rossetto (2019), Gomes & Wojahn (2017), and Bamfo & Kraa (2019) have all reported that this relationship is mixed. However, this study believes that managers or owners of SMEs that apply experience and cognition to acquire, exchange, and use new or existing knowledge of customer needs, wants, and environmental factors will be able to contribute positively towards the performance of their SMEs. Following from the empirical evidence and theoretical evidence, I propose the following hypothesis:
-
Hypothesis 2: Learning orientation has a significant and positive effect on the performance of SMEs in Nigeria.
Entrepreneurial orientation and performance
Entrepreneurial orientation, on the other hand, captures managers’ or SME owners’ behavior in the pursuit of new opportunities (Covin & Slevin, 1991). It also covers the activities, processes, and practices that managers or owners of SMEs develop and implement in the pursuit of such activities. Entrepreneurial orientation could, therefore, be defined as a firm’s ability and capacity to exploit new opportunities using its resources in order to achieve organizational success. In order words, the focus of entrepreneurial orientation is on the processes, practices, decision-making, and actions that managers or owners of SMEs take in the pursuit of new entrepreneurial opportunities. Covin et al. (2006) have been identified as the scholars that consider entrepreneurial orientation as a distinctive strategic orientation dimension. Its importance to organizational sustainability is fundamental, which has given rise to theoretical arguments that posit that entrepreneurial orientation supports managers or owners of SMEs to identify the vision and mission of the SME and therefore deploy the resources needed to realize the vision and mission accordingly (Rauch, et al., 2009). Entrepreneurial orientation has been linked to behaviors, such as proactiveness, innovativeness, risk-taking, competitive aggressiveness, and autonomy (Lumpkin & Dess, 1996, 2001). These behavioral dispositions are central to firm performance providing scholars the opportunity to explore their relationships.
Research conducted by Nasir (2013) involving Malaysian SMEs established that entrepreneurial orientation has a significant positive effect on firm performance. Another study conducted by Khan et al. (2022) which was carried out in Pakistan involving family SMEs was able to establish that entrepreneurial orientation contributes positively to firm performance. Zubair & Olaolu (2021) study which was also carried out using a sample of SMEs in Abuja, Nigeria, also established the positive role of entrepreneurial orientation on the performance of SMEs in Nigeria. This study, therefore, argues that managers or owners of SMEs that show proactive, innovative, and competitive aggressiveness behaviors will be able to improve the performance of their SMEs. Based on this theoretical argument and empirical evidence, the following hypothesis is stated thus:
-
Hypothesis 3: Entrepreneurial orientation has a significant and positive effect on the performance of SMEs in Nigeria.
Moderating role of competitive intensity
Competitive intensity is recognized as an important environmental variable that has a significant impact on firm performance (Walumweya & Phiri, 2022). It is a central concept in strategic management (Peteraf, 1993). Competitive intensity captures the degree of competitiveness in an existing market (Chen, 1996). Ramaswamy & Renforth (1996) and Porter (2008) captures this concept in his five forces theory defining it in terms of the level and degree of attractiveness of an industry. His conceptualization has influenced Auh & Menguc (2005) to argue that where there is competitive intensity in an industry, there is fierce competition as a result of the high number of competitors in the industry. The authors also characterize competitive intensity as the lack of growth opportunities in the said industry. Zhang et al. (2020) on their part characterize competitive intensity as promotion wars, similar product offerings, and a high level of price competition. It could, therefore, be argued that a highly intense industry has the capacity to moderate the positive effect of strategic orientation on firm performance (Amadasun & Mutezo, 2022; Nwachukwu & Vu, 2022). This position derives strength in theoretical arguments that posit that the perceived hostility in an industry affects the actions, processes, and decisions that firms take that are targeted at improving firm performance.
For instance, a study by Onditi et al. (2021) involving private security firms in Kenya was able to establish that competitive intensity moderates the relationship between market orientation and nonfinancial performance but not financial performance. Kura et al. (2020) on their part explored the moderating role of competitive intensity in the relationship between entrepreneurial orientation and SME performance. The authors relied on a sample of SMEs in North-East Nigeria and were able to confirm this hypothesized relationship. A similar report was found by Shehu & Mahmood (2014). Neneh’s (2016) study on the other hand was carried out in South Africa with the result indicating that the external environment has a significant but negative effect on the relationship between market orientation and SME performance. In an elaborate meta-analysis conducted by Kirca et al. (2005), the authors established that competitive intensity fails to moderate the positive effect of market orientation and performance. Despite this contrary evidence, this study hypothesizes that competitive intensity moderates the positive effect of market orientation, learning orientation, and entrepreneurial orientation on the performance of SMEs in Nigeria. Following these empirical and theoretical arguments, the following hypotheses are stated thus:
-
Hypothesis 4a: Competitive intensity moderates the relationship between market orientation and the performance of SMEs in Nigeria.
-
Hypothesis 4b: Competitive intensity moderates the relationship between learning orientation and the performance of SMEs in Nigeria.
-
Hypothesis 4c: Competitive intensity moderates the relationship between entrepreneurial orientation and the performance of SMEs in Nigeria.
Based on the above discussion, the following hypotheses stated are captured in the following conceptual framework (see Fig. 1).
Research methodology
Population and sampling
The population of this study consists of 1,811 SMEs in a state in North-Central Nigeria. Applying the Taro Yamane (1967) formula produced a sample size of 328. Simple random sampling was used in sample selection regardless of the sector an SME operates. Three hundred twenty-eight questionnaires were therefore distributed to SMEs while only 268 were retrieved. Out of the retrieved questionnaires, 55 were discarded because they were wrongly filled producing a usable sample size of 213, which gives an effective response rate of 65% (Table 1).
Among the valid responses, 63% are male while 37% are female with 72%, 23%, and 5% indicating they are either married, single, or divorced. In terms of their level of education, 20% indicated they hold a diploma/NCE certificate, 59% hold an HND/undergraduate degree, and16% hold a master’s degree, while 5% possess a professional certification. Regarding their age, 10% indicated they are in the 18–28 year age bracket, 41% in the 29–39 year age bracket, and 36% in the 40–50-year-old bracket, while 13% indicated they are above 50 years. Additionally, 64% of the responses indicated that they were owners of the SMEs and 24% indicated they were owner/manager, while 12% indicated they were managers. Lastly, 19% were in the manufacturing sector, 17% indicated they are either in the education retail sector, and 16% indicated they are either in the services sector or other sectors, while 15% indicated they are in ICT sector.
Measurement instruments
A questionnaire was used for data collection with the items rendered on a 5-point Likert scale for all the variables of the study. The scale ranked from strongly disagree (1), disagree (2), undecided (3), agree (4), and strongly agree (5). The operationalization of the measures is presented in Table 2.
Strategic orientation
Strategic orientation as a multidimensional construct was delineated into market, learning, and entrepreneurial orientations. The items of market, learning, and entrepreneurial orientation were measured using the validated measures developed by Deshpande & Farley (1998), Sinkula et al. (1997), and Gonzalez-Benito et al. (2009), respectively. Market, learning, and entrepreneurial orientation consisted of 6 items each. Sample items for market orientation include “We are more customer focused than our competitors” and “Our business objectives are driven primarily by customer satisfaction.” For learning orientation, the sample items include “The basic values of our firm include learning as key to performance” and “Learning in our firm is seen as a key commodity necessary to guarantee performance.” Lastly, for entrepreneurial orientation, sample items include “The changes introduced in our product/services are usually important” and “We usually beat our competitors in developing innovative actions.”
Competitive intensity
Competitive intensity comprised 6 items that were adapted from the validated measures of Jaworski and Kohli (1993). Sample items include the following: “Competition is fierce in our industry,” “Every time a competitor does something, the others quickly do the same,” and “In our industry, price is the main component of the competitive conflict.”
Performance
Lastly, performance was measured using the validated measures developed by Chandler and Hanks (1993). We defined performance in terms of growth in the following indicators: change in cash flow, change in market share, and sales growth. Therefore, performance in this study is a 3-item scale that seeks to explore the growth in SMEs’ cash flow, market share, and sales growth.
Data analysis and results
Data analysis was conducted using the Partial Least Square Structural Equation Modeling (PLS-SEM). PLS-SEM is a multivariate statistical technique that is capable of simultaneously exploring the effect of multiple predictors on multiple response variables even in small samples (Hair et al., 2017). Smart PLS v.3 was used in analyzing the data in this study. The measurement model was evaluated before the structural model.
Measurement model evaluation
Prior to testing the hypotheses, the convergent and discriminant validity of the measurement instruments were evaluated. In PLS-SEM, convergent validity consists of three tests: item reliability, composite reliability, and average variance extracted (Fornell & Larcker, 1981). Assessing the item reliability indicated that two items of market orientation (mkO1, mkO3) were removed. Three items of competitive intensity (cmIn1, cmIn2, cmIn4) are removed likewise one item of learning orientation (lrO1). All the items were removed as a result of low indicator loadings < 0.50 (Chin, 1998). Thereafter, in terms of the composite reliability, all the constructs had values > 0.70 (Fornell & Larcker, 1981) indicating reliability of the latent constructs. This was confirmed by the Cronbach’s alpha (α) which demonstrated a minimum threshold value > 0.70 (Nunnally & Bernstein, 1978) for all the latent constructs. The last aspect of convergent validity evaluated is the AVE. For latent constructs to demonstrate convergent validity, the AVE > 0.5 (Fornell & Larcker, 1981). The results also confirmed that the latent constructs demonstrate convergent validity based on the AVE of the latent constructs (see Table 3).
In evaluating discriminant validity, both the Fornell & Larcker (1981) criteria and the Hetetrait-Monotrait Ratio of Correlation (HTMT) were used. In the former criteria, validity is achieved if the square root of the AVE is larger than the correlation of the related latent constructs. Based on the results of the PLS analysis as captured in Table 4, discriminant validity is established as all the off-diagonal elements are less than the elements in the diagonal.
The HTMT confirmed the discriminant validity of the constructs. Gold et al. (2001) recommend that HTMT values < 0.90 indicates discriminant validity. Based on the results as shown in Table 5, none of the values of the HTMT is above the threshold value of 0.90; hence, the discriminant validity of the latent constructs is established. The reliability and validity of the measurement instruments are satisfied; hence, the study proceeded to evaluate the structural model.
Structural model evaluation
Smart PLS was used in evaluating the structural relationships. Prior to evaluating the result of the structural model, the fit of the model was assessed by evaluating the standardized root mean square residual (SRMR) value which should be < 0.08 (Henseler et al., 2015). Based on the results of the PLS analysis, the SRMR = 0.075 is below the threshold of 0.08 indicating the overall fitness of the model. The goodness of the structural model was evaluated using the R-square value which was > 0.10 (Latif et al., 2019) at 0.31. In addition, the study estimated the predictive relevance of the endogenous latent constructs which also had values of Q2 > 0.00 indicating out-of-sample predictive relevance (Hair et al., 2017). This provides clear support for the model’s predictive relevance regarding the two endogenous variables. In testing the significance of the structural model, the following criteria were implemented: bootstrapping resamples, 500; test type, 2-tailed; significance level, 0.05; and confidence interval level, Bias-Corrected Accelerated (BCa) Bootstrap. The result of the structural relationship is captured in Fig. 2 with test of hypotheses in Table 6.
All but hypothesis one is accepted as shown in Table 4. In hypothesis one, the effect of market orientation on the performance of SMEs was supported (β = 0.288, t = 4.696, P < 0.001). In terms of learning orientation (β = 0.084, t = 1,090, P = 0.276) and entrepreneurial orientation (β = 0.029, t = 0.474, P = 0.636), their effect on the performance of SMEs was not supported as indicated by the results. The result, therefore, showed that hypothesis two and hypothesis three are not accepted. Hypotheses 4a–4c captured the moderating role of competitive intensity in the relationship between market, learning, and entrepreneurial orientations; the result of the PLS-SEM failed to support these proposed relationships and was, therefore, not accepted. As Table 4 shows, the moderating role of competitive intensity in the relationship between market orientation (β = − 0.152, t = 1.708, P = 0.088), learning orientation (β = 0.086, t = 1.019, P = 0.309), and entrepreneurial orientation (β = 0.009, t = 0.101, P = 0.920) was not significant.
Discussion
This study was conducted to examine the direct effect of strategic orientation dimensions of market, learning, and entrepreneurial orientations on the performance of SMEs in Nigeria. The study also examined the moderating role of competitive intensity in the hypothesized relationships. The study was based on a sample of SMEs in a state in North-Central Nigeria with the unit of analysis being the owners or owner/managers of the respective SMEs.
For hypothesis one, the study hypothesis stated that the effect of market orientation on the performance of SMEs will be significant and positive. Based on the result, this hypothesis is supported indicating that market orientation contributes positively to SME performance in Nigeria. This implies that when owners of SMEs or their managers are customer-focused than their competitors with their business objectives driven primarily by customer satisfaction, then this will contribute to the performance of their SMEs. This finding also indicates that activities or behaviors of owners of SMEs or their managers that are targeted at implementing the marketing concept (Ospina & Perez, 2013) will support positive SME performance. This finding mirrors the research conclusions by Ayayi et al. (2018), Ladipo et al. (2016), Nurala et al. (2021), and Cuu & Trang (2021). A similar research finding was established by Akomea & Yeboah (2011) in Ghana. The authors also found that market orientation has a significant impact on the performance of SMEs in their country. However, a contrary study by Shehu & Mahmood (2014) and Bamfo & Kraa (2019) have indicated that market orientation fails to predict the performance using a sample of SMEs in Kano State, Nigeria.
Regarding hypothesis two, the evidence did not support the hypothesized direct effect of learning orientation on the performance of SMEs in Nigeria. This implies that SMEs whose organizational values include learning or who see learning as a key commodity that guarantees firm performance will be incapable of contributing positively to their performance. The result seems to suggest that the generation and utilization of knowledge (Sinkula et al. 1997) within SMEs do not support the performance of such SMEs. This research conclusion agrees with the research findings by Werlang & Rossetto (2019), Gomes & Wojahn (2017), and Bamfo & Kraa (2019). Their result revealed that learning orientation does not support SME performance.
Discussing hypothesis three, which tests the direct effect of entrepreneurial orientation on the performance of SMEs, the result is also not supported. Entrepreneurial orientation fails to predict the performance of SMEs in Nigeria. The implication is that despite SMEs introducing important changes in their products or services and/or developing innovative activities and actions that outperform what their competitors do is not sufficient to impact positively on the performance of SMEs. This result contradicts the theoretical arguments by Rauch et al. (2009) that entrepreneurial orientation supports managers or owners of SMEs in realizing their vision and mission. This finding is in consonance with earlier research studies conducted by Na-Allah & Ahmad (2022) and Nsikak-Abasi et al. (2022) who also found that entrepreneurial orientation does not support the performance of SMEs. Specifically, a study conducted by Amarteifio & Agbeblewu (2020) showed that the entrepreneurs in Ghana exhibit low levels of entrepreneurial orientation and that these have a marginal and negligible impact on the performance of SMEs in the study context, which is Ghana. This reflects largely the findings as captured in this study.
Lastly, in hypothesis four, the focus was on evaluating the role that environmental factors, specifically competitive intensity, play in the relationship between strategic orientation dimensions and the performance of SMEs in Nigeria. Unfortunately, the result of the hypotheses was not accepted. The result showed that competitive intensity does not moderate the relationship between market orientation and performance of SMEs (H4a), learning orientation and performance of SMEs (H4b), and entrepreneurial orientation and performance of SMEs (H4c). In a highly intensive competitive environment, the positive effect of strategic orientation dimensions of market, learning, and entrepreneurial fails to support the performance of SMEs in Nigeria. In order words, in highly competitive business environments, the intensity of the competition does not support the positive effect of strategic orientation on the performance of SMEs in Nigeria. In other words, it does not strengthen the positive effect of market, learning, and entrepreneurial orientations on the performance of SMEs in Nigeria. This finding agrees with a recent moderated mediation study conducted by Iyortsuun & Shakpande (2022). Their study also found that environmental factors, specifically environmental uncertainty, do not moderate the positive effect of passion and persistence (individual factors) on the growth of SMEs in Nigeria.
Theoretical and practical implication
This study presents some theoretical and practical contributions to academics and policymakers. Firstly, studies (Abiodun & Ibidunni, 2014; Akeke et al., 2021; Grawe et al., 2009; Ibobo & Hope, 2020; Nugroho et al., 2022; Ogunkoya & Shodiya, 2013) seemed to suggest that multiple aspects of strategic orientation help SMEs performance. However, this study provides contrary empirical evidence that seems to suggest single aspects of strategic orientation; in this study, market orientation helps support the performance of SMEs in Nigeria. Secondly, the study has contributed to the role of the SCT in explaining SME performance. The theory argues that individuals taking cues from the environment carry out behaviors to achieve specific objectives. Owners’ of SMEs or managers assess the competitive nature of the industry and therefore carry out specific behaviors (market orientation) that help to mitigate any negative effect of such environmental factors to support the performance of their SMEs.
Thirdly, the study has practical contribution to the government and regulators of SMEs. Policy prescriptions should focus on helping owners or manager of SMEs to focus on market orientation as it is this aspect of strategic orientation that has the potential of contributing positively to the performance of their SMEs. Specifically, for government to support the performance of SMEs, training programs should target not just behavior modification to align with market orientation practices but also the development of organizational cultures that support market orientation practices as espoused by Kohli & Jaworski (1990) and Narver and Slater (1990). If the regulators of SMEs and the government focus on this aspect of strategic orientation, then the performance of SMEs in Nigeria will be enhanced.
Limitation and suggestion for further studies
One of the major limitations of this study is the cross-sectional nature of the research design. With such a research design, causality is difficult to achieve. This is the major limitation of the study. Future studies should consider using longitudinal research designs which are capable of establishing causality in research findings. The study was also limited to the three dimensions of market, learning, and entrepreneurial orientations without considering other dimensions such as technology, customer, competitor, product, and interaction orientations. Future studies could consider using more dimensions to better understand which aspects of strategic orientation impact the most on the performance of SMEs. Another limitation is the study context, which is limited to a state in North-Central Nigeria. Future studies could expand the scope to cover more geographical regions in the country. Multicountry studies can also be conducted in future research studies. Future studies can also include mediators in the relationship between strategic orientation and the performance of SMEs. It is worth to note that learning and entrepreneurial orientations do not contribute positively to the performance of SMEs. Perhaps their impact on performance can go through mediating variables which were not included in this study. Future studies could, therefore, explore why learning and entrepreneurial orientation do not support SME performance or whether their influence is via mediating variables. Likewise, no moderating effect was reported. This is a remarkable finding that requires further empirical tests to explore why competitive intensity fails the moderate the relationship between the three dimensions of strategic orientation and firm performance.
Conclusion
This study was an attempt at exploring the impact of strategic orientation on the performance of SMEs in North-Central Nigeria. Strategic orientation was operationalized as market, entrepreneurial,, and learning orientation. Relying on a sample of 213 SMEs, the study established that only market orientation makes a significant contribution to the performance of SMEs in North-Central Nigeria. The study also demonstrated the theoretical and practical significance of the study and also noted the limitations as discussed in the preceding subsection. Despite these notable limitations, this study has contributed to the strategic management literature by providing empirical evidence that supports the positive influence of strategic orientation on the performance of SMEs in Nigeria.
Data availability
The author declares that all data and materials used in this paper are available on request.
Code availability
Not applicable.
Abbreviations
- PLS-SEM:
-
Partial least square structural equation modeling
- SMEs:
-
Small and medium scale enterprises
- SCT:
-
Social cognitive theory
References
Abiodun, A. J., & Ibidunni, A. S. (2014). Strategic orientation and performance of agro-based firms in transition economy. African Journal of Business Management, 8(13), 495–501.
Adeosun, O. T., & Shittu, A. I. (2021). Small–medium enterprise formation and Nigerian economic growth. Review of Economics and Political Science. https://doi.org/10.1108/REPS-07-2020-0089
Akaeze, N. S., & Akaeze, C. (2017). Exploring the survival strategies for small business ownership in Nigeria. Australian Journal of Business and Management Research, 5(7), 35–48.
Akeke, N. I., Akeke, A. R., Awolaja, A. M., & Oyebanji, M. O. (2021). Effects of strategic orientation on performance of telecommunication sector in Nigeria. Economics and Business Quarterly Reviews, 4(3), 200–207.
Akomea, S. Y., & Yeboah, J. K. G. (2011). Market orientation and firm performance in Ghana’s pharmaceutical industry. Journal of Science and Technology, 31(2), 109–119.
Amadasun, D. O. E., & Mutezo, A. T. (2022). Effect of market-driven strategies on the competitive growth of SMEs in Lesotho. Journal of Innovation and Entrepreneurship, 11(21), 1–17.
Amarteifio, E. N. A., & Agbeblewu, S. (2020). Entrepreneurial orientation and firm performance of tourist accommodation establishment in Ghana. Open Journal of Business and Management, 8, 1619–1640.
Auh, S., & Menguc, B. (2005). Balancing exploration and exploitation: The moderating role of competitive intensity. Journal of Business Research, 58(12), 1652–1661.
Ayayi, M. O., Adeniji, P. O., & Ighomereho, O. S. (2018). The impact of market orientation on performance of selected hotels in Ondo State, Nigeria. Open Journal of Business and Management, 6(3), 616–631.
Bamfo, B. A., & Kraa, J. J. (2019). Market orientation and performance of small and medium enterprises in Ghana: The mediating role of innovation. Cogent Business & Management, 6(1), 1–1.
Bandura, A. (1989). Social cognitive theory. Six theories of child developmentIn R. Vasta (Ed.), Annals of child development (Vol. 6, pp. 1–60). JAI Press.
Baron, R. M., & Kenny, D. A. (1986). The moderator-mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology, 51(6), 1173–1182.
Bontis, N., Crossan, M., & Hulland, J. (2002). Managing an organizational learning system by aligning stocks and flows. Journal of Management Studies, 39(4), 437–469.
Bylykbashi, S., Roehrich, G., & Assala, K. (2021). How to measure competitive intensity? European Journal of Economics, Law and Social Sciences, 5(1), 22–42.
Chandler, G. N., & Hanks, S. H. (1993). Measuring the performance of emerging businesses: A validation study. Journal of Business Venturing, 8(5), 391–408.
Chen, M. (1996). Competitor analysis and interfirm rivalry: Toward a theoretical integration. Academy of Management Review, 21(1), 100–134.
Chin, W. W. (1998). The partial least squares approach to structural equation modeling. In G. A. Marcoulides (Ed.), Modern methods for business research (pp. 295–358). Lawrence Erlbaum Associates.
Covin, J. G., & Slevin, D. P. (1991). A conceptual model of entrepreneurship as a firm behavior. Entrepreneurship Theory and Practice, 16, 7–25.
Covin, J. G., Green, K. M., & Slevin, D. P. (2006). Strategic process effects on the entrepreneurial orientation–sales growth rate relationship. Entrepreneurship Theory and Practice, 30, 57–81.
Cuu, L. H., & Trang, B. T. (2021). Market orientation, corporate social responsibility, and firm performance: The moderating role of relationship marketing orientation. Cogent Business & Management, 8(1), 1–19.
Deshpande, R., & Farley, J. U. (1998). Measuring market orientation: Generalization and synthesis. Journal of Market Focused Management, 2, 213–232.
Dibal, S., Iyortsuun, A. S., & Haruna, A. H. (2021). Asymmetric impact of financial market development on entrepreneurship in Nigeria. In V. D. Ngo, D. K. Nguyen, & N. T. Nguyen (Eds.), Entrepreneurial Finance, Innovation and Development (pp. 160–187). Routledge.
Dutta, D. K., Gupta, V. K., & Chen, X. (2016). A tale of three strategic orientations: A moderated-mediation framework of the impact of entrepreneurial orientation, market orientation and learning orientation on firm performance. Journal of Enterprising Culture, 24(3), 313–348.
Effiom, L., & Edet, S. E. (2018). Success of small and medium enterprises in Nigeria: Do environmental factors matter? Journal of Economics and Sustainable Development, 9(4), 117–128.
Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of Marketing Research, 18, 39–50.
Gatignon, H., & Xuereb, J.-M. (1997). Strategic orientation of the firm and new product performance. Journal of Marketing Research, 34, 77–90.
Gold, A. H., Malhotra, A., & Segars, A. H. (2001). Knowledge management: An organizational capabilities perspective. Journal of Management Information Systems, 18(1), 185–214.
Gomes, G., & Wojahn, R. M. (2017). Organizational learning capability, innovation and performance: Study in small and medium-sized enterprises (SMES). Revista ADM, 52(2), 163–175.
Gonzalez-Benito, O., Gonzalez-Benito, J., & Munoz-Gallego, P. A. (2009). Role of entrepreneurship and market orientation in firms’ success. European Journal of Marketing, 43(3/4), 500–522.
Grawe, S. J., Chen, H., & Daugherty, P. J. (2009). The relationship between strategic orientation, service innovation, and performance. International Journal of Physical Distribution and Logistics Management, 39(4), 282–300.
Hair, J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, M. (2017). A primer on partial least squares structural equation modeling (PLS-SEM) (2nd ed.). SAGE.
Hamden, A., Ghura, H., Alareeni, B., & Hamdan, R. K. (2022). Entrepreneurship growth in emerging economies: New insights and approaches. Journal of Sustainable Finance and Investment, 12(1), 1–12.
Harris, L. (2002). Developing market orientation: An exploration of differences in management approaches. Journal of Marketing Management, 18(7/8), 603–632.
Henseler, J., Ringle, C. M., & Sarstedt, M. (2015). A new criterion for assessing discriminant validity in variance-based structural equation modeling. Journal of the Academy of Marketing Science, 43, 115–135.
Herath, H. M. A., & Rosli, M. (2014). Dimensions of entrepreneurial self-efficacy and firm performance. Global Journal of Management and Business Research, 14(4), 22–30.
Ibarra-Cisneros, M.-A., Demuner-Flores, M. D. R., & Hernández-Perlines, F. (2021). Strategic orientations, firm performance and the moderating effect of absorptive capacity. Journal of Strategy and Management, 4(4), 582–611. https://doi.org/10.1108/JSMA-05-2020-0121
Ibobo, B., & Hope, N. N. (2020). Strategic orientation and performance of manufacturing firms in Nigeria. International Journal of Business and Management Research, 1(1), 225–245.
Iyortsuun, A. S., & Shakpande, C. (2022). Passion, persistence, and firm growth: Moderating role of environmental uncertainty. BRQ Business Research Quarterly. https://doi.org/10.1177/23409444211070297
Jaworski, B., & Kohli, A. (1993). Market orientation: Antecedents and consequences. Journal of Marketing, 57(3), 53–70.
Khan, R. U., Salamzadeh, Y., Abbasi, M. A., Amin, A., & Sahar, N. E. (2022). Strategic orientation and sustainable competitive performance of family firms: Evidence of an emerging economy. Journal of Small Business Strategy, 32(2), 67–82.
Kirca, A. H., Jayachandran, S., & Bearden, W. O. (2005). Market orientation: A meta-analytic review and assessment of its antecedents and impact on performance. Journal of Marketing, 69, 24–41.
Kohli, A. K., & Jaworski, B. J. (1990). Market orientation: The construct, research propositions, and managerial implications. Journal of Marketing, 54(2), 1–18.
Kropp, F., Lindsay, N. J., & Shoham, A. (2006). Entrepreneurial, market, and learning orientations and international entrepreneurial business venture performance in South African firms. International Marketing Review, 23(5), 504–523.
Kura, K. M., Abubakar, R. A., & Salleh, N. M. (2020). Entrepreneurial orientation, total quality management, competitive intensity, and performance of SMEs: A resource-based approach. Journal of Environmental Treatment Techniques, 8(1), 61–72.
Ladipo, P. K. A., Rahim, A. G., Oguntoyibo, C. A., & Okikiola, I. O. (2016). Market orientation and business performance: A study of interrelationships and effects in a small sized hotels within Lagos State metropolis. Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy, 2(4), 98–119.
Latif, M. Z., Hussain, I., Saeed, R., Qureshi, M. A., & Maqsood, U. (2019). Use of smart phones and social media in medical education: trends, advantages, challenges and barriers. Acta Informatica Medica, 27(2), 133–138.
Lumpkin, G. T., & Dess, G. G. (1996). Clarifying the entrepreneurial orientation construct and linking it to performance. Academy of Management Review, 21(1), 135–172.
Lumpkin, G. T., & Dess, G. G. (2001). Linking two dimensions of entrepreneurial orientation to firm performance: The moderating role of environment and industry life cycle. Journal of Business Venturing, 16(5), 429–451.
Lussier, S. H. R. (2016). Why businesses succeed or fail: A study on small businesses in Pakistan. Journal of Entrepreneurship in Emerging Economies, 8(1), 82–100.
Martinez, J. E. V., Serna, M. C. M., & Montaya, N. P. (2020). Dimensions of learning orientation and its impact on organizational performance and competitiveness in SMEs. Journal of Business Economics and Management, 21(2), 395–420.
Na-Allah, S. R., & Ahmad, N. H. (2022). Entrepreneurial orientation and venture creation in Nigerian context: Assessing mediating and moderating roles of self-efficacy and entrepreneurial support among graduates. Sustainability, 14, 1–25.
Narver, J. C., & Slater, S. F. (1990). The effect of market orientation on business profitability. Journal of Marketing, 54, 20–35.
Nasir, W. (2013). The relationship between strategic orientation and firm performance: evidence from small and medium scale enterprises in Malaysia. Unpublished Ph.D thesis. Melbourne, Australia: Victoria University.
Neneh, B. N. (2016). Market orientation and performance: The contingency role of external environment. Environmental Economics, 7(2), 130–137.
Nsikak-Abasi, A. E., Edet, J. U., & Enobong, E. K. (2022). Entrepreneurial orientation and the performance of the agro-allied enterprises in Akwa Ibom State, Nigeria. Journal of Social Commerce, 2(1), 24–33.
Nugroho, A., Prijadi, R., & Kusumastuti, R. D. (2022). Strategic orientations and firm performance: The role of information technology adoption capability. Journal of Strategy and Management. https://doi.org/10.1108/JSMA-06-2021-0133
Nunnally, J., & Bernstein, I. (1978). Psychometric theory. McGraw-Hill.
Nurala, S., Rana, S., & Srivastava, S. (2021). Improving firm performance using market orientation and capabilities: A case study approach. South Asian Journal of Business Studies. https://doi.org/10.1108/SAJBS-10-2021-0375
Nwachukwu, C., & Vu, H. M. (2022). Service innovation, marketing innovation and customer satisfaction: Moderating role of competitive intensity. SAGE Open, 12(2). https://doi.org/10.1177/21582440221082146
Obeidat, B. Y. (2016). The effect of strategic orientation on organizational performance: The mediating role of innovation. International Journal of Communications, Networks and System Sciences, 9, 478–505.
Ogunkoya, O. A., & Shodiya, O. A. (2013). Strategic orientation and organizational performance: A study of the African textile industry. Singaporean Journal of Business Economics, and Management Studies, 2(4), 1–8.
Onditi, E. O., Kibera, N. F., Aranga, M. J., & Iraki, X. N. (2021). The moderating effect of competitive intensity on the relationship between market orientation and performance of private security firms in Kenya. The Strategic Journal of Business and Change Management, 7(1), 47–65.
Organization for Economic Cooperation and Development [OECD] (2017). Enhancing the contributions of SMEs in a global and digitalized economy. Meeting of the OECD Council at Ministerial Level at Paris, 7-8 June. Retrieved March 23, 2020, from www.oecd.org/industry/C-MIN-2017-8-EN.pdf
Ospina, J. M., & Perez, G. (2013). A measure of market orientation: Development and validation in a different cultural context. Innovar, 23(49), 41–49.
Peteraf, M. (1993). The cornerstones of competitive advantage: A resource-based view. Strategic Management Journal, 14, 179–191.
Porter, M. (2008). The five competitive forces that shape strategy. Harvard Business Review, 1, 79–95.
Ramaswamy, K., & Renforth, W. (1996). Competitive intensity and technical efficiency in public sector firms: Evidence from India. International Journal of Public Sector Management, 9(3), 4–17.
Rauch, A., Wiklund, J., Lumpkin, G. T., & Frese, M. (2009). Entrepreneurial orientation and business performance: An assessment of past research and suggestions for the future. Entrepreneurship Theory and Practice, 33(3), 761–787.
Rezazadeh, B., Karami, H., & Karami, A. (2016). Technology orientation, dynamic capabilities and SMEs performance. Strategic Management Quarterly, 4(1), 41–60.
Sharmilee, S., & Muhammad, H. (2016). Factors affecting the performance of small and medium enterprises in KwaZulu-Natal, South Africa. Problems and Perspectives in Management, 14(2–2), 277–288.
Shehu, A. M., & Mahmood, R. (2014). Market orientation and firm performance among Nigerian SMEs: The moderating role of business environment. Mediterranean Journal of Social Sciences, 5(23), 158–164.
Sinkula, J. M., Baker, W. E., & Noordewier, T. (1997). A framework for market-based organizational learning: Linking values, knowledge and behavior. Journal of the Academy of Marketing Science, 25(4), 305–318.
Tomal, D. R., & Jones, K. J. (2015). A comparison of core competencies of women and men leaders in the manufacturing industry. The Coastal Business Journal, 14, 13–25.
Voss, G. B., & Voss, Z. G. (2000). Strategic orientation and firm performance in an artistic environment. Journal of Marketing, 64, 67–83.
Walumweya, M., & Phiri, J. (2022). Adopt effective competitive strategies in response to environmental challenges for national public broadcasting corporation in developing countries: A participatory approach. Open Journal of Business and Management, 10, 175–191.
WeeTracker (2020). Tracing the success and failure of African startups. Retrieved March 22, 2020, from weetracker.com/wp-content/uploads/GCAF_The/Bette/Africa/March.pdf
Weinzimmer, L. G., Robin, J., & Michel, E. J. (2012). The measurement of strategic orientation and its efficacy in predicting financial performance. Journal of Business Strategies, 29(2), 81–98.
Werlang, N. B., & Rossetto, C. R. (2019). The effects of organizational learning and innovativeness on organizational performance in the service provision sector. Gestão & Produção, 26(3), 1–18.
Zhang, H., Wang, Y., & Song, M. (2020). Does competitive intensity moderate the relationships between sustainable capabilities and sustainable organizational performance in new ventures? Sustainability, 12(253), 1–18.
Zubair, A. K. I., & Olaolu, E. O. (2021). Entrepreneurial orientation and government policy: The catalysts for SME performance in Nigeria. International Journal of Advanced Research in Social Sciences, Environmental Studies & Technology, 6(1), 77–96.
Funding
This research was supported by the University of Jos.
Author information
Authors and Affiliations
Contributions
MCG: The author was responsible for conceptualizing, data analysis, and preparation of this paper for publication.
Corresponding author
Ethics declarations
Competing interests
The author declares no competing interests.
Rights and permissions
Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.
About this article
Cite this article
Gajere, M.C. Strategic orientation and performance of SMEs in Nigeria: moderating role of competitive intensity. J Glob Entrepr Res 13, 7 (2023). https://doi.org/10.1007/s40497-023-00347-3
Received:
Accepted:
Published:
DOI: https://doi.org/10.1007/s40497-023-00347-3